Yellen could be the one to kick the S&P to 2,000

Yellen speaks at the Fed's annual Jackson Hole symposium at 10 a.m. EST Friday, in a speech that's been anticipated for weeks and was widely expected to be typically dovish. However, since Wednesday, traders have been wondering if she would sound more like the Fed's hawkish July meeting minutes or her normal dovish self.

"The risk is she's not as dovish as they all hope," said Art Cashin, director of floor operations at UBS. Yellen is expected to speak on the labor market, and the Fed minutes noted that Fed officials were surprised by improvement in the employment picture.

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Jackson Hole, Wyoming

Yellen's speech topic is "Re-Evaluating Labor Market Dynamics" and she was expected to repeat her comments that the Fed needs to maintain easy policy that will help the labor market heal. Fed watchers were also hoping to get more guidance as to what metrics Yellen is watching on the labor market.

"There's a sense in the minutes, that the committee is no longer writing a blank check. They want to keep things moving," Cashin said. "If you were looking at this as a 50/50, there's a high chance she spooks the market."

Even though the minutes were hawkish, stocks have continued to rally. The S&P 500 is up 1.9 percent so far this week and is on track for its best weekly gain in four months. The S&P closed at 1,992 Thursday–its 28th new high this year. Deutsche Bank currency strategist Alan Ruskin points out that the stock market performance this week is the best pre-Jackson Hole performance in at least a decade.

Cashin said short covering helped boost the market, and there was also talk that a dovish Yellen could propel stocks even higher.

"Logic would tell you people should have been sitting on their hands waiting for tomorrow," he said. Stronger-than-expected home sales data, and jobless claims back below 300,000 after last week's move higher, added a positive tone.

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European Central Bank President Mario Draghi is also expected to speak at Jackson Hole, at 2:30 p.m. EST. "Draghi is going to be a wild card. What's he going to do? Europe is weakening," Cashin said.

The market is looking for Draghi to explain whether Europe will carry out its own version of quantitative easing, or asset purchases.

"He's going to have to explain it. A lot of people think he's handcuffed. Whatever he says will be a surprise. Either he admits he's handcuffed, or he explains it."

Scott Redler, partner at T3Live.com, said the market was also boosted by the bank stocks. The S&P financial sector was the best performing major sector, up 1.2 percent Thursday, in its best day since May 7.

"You had technology acting a little weird. High beta names had no power. It was the banks that carried the baton today," said Redler, who follows short term techincals.

"Most thought it could happen going into Jackson Hole, and the Fed minutes but we weren't prepared for it. When Bank of America opened up on the settlement talks and squeezed every short, people started putting money into the banks. If the banks follow through (Friday) and don't give much back, the banks would be the group that takes the S&P to 2000."

Redler said if Yellen's comments push the S&P above 2,000, it may not go much further without taking a breather.

"At this point, it feels like you're chasing the market. The bulls are kind of scared to buy and shorts aren't really working. Plus everyone's on vacation–and it still goes higher. It's a weird dynamic. A better dynamic might be to be on a beach," he said.

Who might steal the Fed's thunder?

Will the European central bank president Mario Draghi be more impactful for the euro than Yellen is for the dollar? CNBC's Patti Domm explains.

He too sees Draghi as a wild card. "If Draghi comes out with some kind of inclination that they might have their own QE, and the DAX resolves higher from its lower range that might give a boost to stocks next week," he said.

The German DAX was up nearly a percent Thursday, while the German 10-year bund continued to trade under 1 percent, dragging on U.S. yields. The short end of the Treasury market, which sold off on the Fed minutes, found buyers Thursday and yields mostly moved lower. The 10-year was yielding 2.40 percent in late trading.

CRT Capital senior Treasury strategist Ian Lyngen said the move in the 10-year was partly technical, after it failed to hold 2.45 percent.

"People are waiting for some type of confirmation (from Yellen) of the sentiment in the minutes, or more likely she goes back to the 'lower for longer' mantra," he said. "The consensus, at least, is for a typically dovish Yellen, and that's kept rates a bit contained."

Lyngen said the market is speculating whether Yellen will signal an earlier rate hike. "Even if she's more balanced, it will be interpreted as hawkish. The problem is she has to be as dovish as she's been in the past and even in doing that, she risks being interpreted as moving forward the first hike," he said. Wall Street consensus is for a first rate hike at mid-year 2015.

Other Fed officials will also be talking Friday. Atlanta Fed President Dennis Lockhart will be on CNBC at 12 p.m. ET.